When you get into the startup game, you hear the terms “incubator” and “accelerator” in your conversations with other founders and entrepreneurs. Maybe you have a friend whose company is working with an incubator, or you attended an event hosted by an accelerator. It can be easy to assume they are one and the same, but they each are different in what kinds of companies they bring in, as well as what they are looking to get in return.
So what IS the difference between an incubator and an accelerator, and is either option right for your business?
Incubators bring in early-stage companies to develop their idea with assistance in the form of office space, resources and access to experts in the startup ecosystem. In exchange for this assistance, the investor or investing group will receive a percentage of equity in each company. There is usually no time limit for participating; each company is brought along at its own pace, usually until it becomes self-sufficient enough to begin operating independently.
Accelerators imply a more expedited process, and that is what you get. Companies that gain acceptance into an accelerator program are looking for resources and guidance to catapult them to their next milestone. Programs last just a few months (usually three) before companies are set off on their own again, and investors will offer up investment capital and act as mentors in exchange for a percentage of equity in the company. This percentage is generally less than what would be requested from an incubator.
What’s the process for applying?
Even though there has been a big jump in the number of both incubators and accelerators cropping up in major markets across the country, it can still be pretty tough to get in. The most popular programs reject hundreds of applications each year. Y Combinator, a top incubator in the Bay Area, has to turn down so many great companies/ideas that they have a page up on their website that explains why they weren’t selected.
Should I choose an Incubator or Accelerator?
Think carefully about what stage your business is in before deciding which route to go. If you are still working through important details such as market fit, product development or even just the right elevator pitch, then an incubator may be the ideal option. If you’re at the MVP stage, have solid financial planning, and need expert input on how to proceed to the next stage of your company’s development, an accelerator is the better choice of the two.
As with other cases, this is a great opportunity to take a look around you. What are other founders and entrepreneurs in a similar stage doing? If you already have a mentor or advisor, do they have any recommendations? Don’t be afraid to tap into your existing network to get additional input on what the best option is for you and your early-stage company.